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Q1 2009 Earning Report of SVB Financial Group

1.
3003 Tasman Drive, Santa Clara, CA 95054
www.svb.com
For release at 1:00 P.M. (Pacific Time) Contact:
April 23, 2009 Meghan O’Leary
Investor Relations
(408) 654-6364
NASDAQ: SIVB
SVB FINANCIAL GROUP ANNOUNCES 2009 FIRST QUARTER FINANCIAL RESULTS
SANTA CLARA, Calif. — April 23, 2009 — SVB Financial Group (NASDAQ: SIVB) today announced financial
results for the first quarter ended March 31, 2009.
Consolidated net loss applicable to common stockholders for the first quarter of 2009 was $10.5 million, or $0.32
per diluted common share, compared to net income available to common stockholders of $1.4 million, or $0.04
per diluted common share, for the fourth quarter of 2008, and net income available to common stockholders of
$27.1 million, or $0.78 per diluted common share, for the first quarter of 2008.
Highlights of our first quarter 2009 results included:
• Provision for loan losses of $43.5 million, of which $32.3 million related to two loans in our hardware
industry portfolio, with the remainder primarily from certain loans to early stage companies.
• Net losses on investment securities, net of noncontrolling interests (formerly referred to as minority
interests), of $4.6 million due to lower valuations of our venture capital/private equity investments as a
result of the continuing effects of the downturn in the overall economy. Consolidated net losses on
investment securities, including noncontrolling interests, were $35.0 million.
• Growth of $2.3 billion in average deposit balances to $7.9 billion, which decreased our average loan-to-
deposit ratio to 64.5 percent for the first quarter of 2009.
• A decrease in our net interest margin from 5.39 percent to 3.97 percent, primarily due to significant
increases in cash due to the growth in our deposit balances, as well as from the current low interest rate
environment.
• A non-tax deductible goodwill impairment charge of $4.1 million resulting from changes in our outlook for
the future financial performance of eProsper, our data management services company.
“These results tell us that our clients were significantly affected by the continuing economic downturn, more so
than we had anticipated,” said Ken Wilcox, president and CEO of SVB Financial Group. “Given that we are
operating in the worst economic environment in nearly 60 years, we were expecting higher-than-normal loan
losses. But the continued volatility and deterioration of the economy made it extremely challenging to predict
exactly when and where such losses might occur. We are monitoring and managing our loan portfolio with
increased vigilance and we will continue to keep our focus on identifying and preventing potential problems.
“We believe the work we have done in the last year to strengthen our capital position and ensure our continued
liquidity will provide sufficient cushion to absorb these losses while allowing us to take advantage of the current
market environment to invest in building our business and helping our clients succeed. It’s true, we expect the
year to continue to be challenging; but we also expect to emerge from this difficult market cycle with greater
market share, and ready to take advantage of the upside potential as the economy recovers.”

3.
(7) Tangible common equity consists of SVBFG stockholders’ equity (excluding preferred equity and unrealized gains and losses from our
fixed income investments) less acquired intangibles and goodwill. Tangible assets represent total assets (excluding unrealized gains and
losses from our fixed income investments) less acquired intangibles and goodwill.
(8) The operating efficiency ratio is calculated by dividing noninterest expense by total taxable equivalent net interest income plus
noninterest income.
(9) Ratio represents non-GAAP annualized consolidated net (loss) income attributable to SVBFG (excluding non-tax deductible goodwill
impairment charge of $4.1 million recorded in the first quarter of 2009) divided by quarterly average assets.
(10) Ratio represents non-GAAP annualized consolidated net (loss) income available to common stockholders (excluding non-tax deductible
goodwill impairment charge of $4.1 million recorded in the first quarter of 2009) divided by quarterly average SVBFG stockholders’ equity
(excluding preferred equity).
(11) The non-GAAP operating efficiency ratio is calculated by dividing noninterest expense (excluding (i) goodwill impairment charges of
$4.1 million recorded in the first quarter of 2009 and (ii) the portion of noninterest expense attributable to noncontrolling interests of
$3.4 million, $3.0 million and $2.8 million for the quarters ended March 31, 2009, December 31, 2008, and March 31, 2008, respectively)
by total taxable equivalent income (excluding taxable equivalent losses attributable to noncontrolling interests of $30.6 million,
$8.7 million and $1.5 million for the quarters ended March 31, 2009, December 31, 2008 and March 31, 2008, respectively).
Net Interest Income and Margin
Net interest income, on a fully taxable equivalent basis, was $92.1 million for the first quarter of 2009, compared
to $97.0 million for the fourth quarter of 2008 and $91.3 million for the first quarter of 2008. The following table
provides a summary of changes in interest income and interest expense attributable to both volume and rate
changes from the fourth quarter of 2008 to the first quarter of 2009. Changes that are not solely due to either
volume or rate are allocated in proportion to the percentage changes in average volume and average rate:
Q1'09 compared to Q4'08
Increase (decrease) due to change in
(Dollars in thousands) Volume Rate Total
Interest income:
Short-term investment securities $ 2,839 $ (2,522) $ 317
Investment securities 972 (1,031) (59)
Loans (2,593) (4,818) (7,411)
Increase (decrease) in interest income, net 1,218 (8,371) (7,153)
Interest expense:
Deposits 1,925 (2,099) (174)
Short-term borrowings (368) (400) (768)
Long-term debt 43 (1,313) (1,270)
Increase (decrease) in interest expense, net 1,600 (3,812) (2,212)
$ (382) $ (4,559) $ (4,941)
Decrease in net interest income
The decrease in net interest income, on a fully taxable equivalent basis, from the fourth quarter of 2008 to the first
quarter of 2009, was primarily attributable to the following:
• A net decrease in interest income from our loan portfolio of $7.4 million driven principally by decreases in
loan yields due to the full quarter effect of a 100 basis point decrease in our prime-lending rate during the
fourth quarter of 2008 in response to certain Federal Reserve rate decreases, as well as a decrease in
average loan balances of $110.4 million. Our average prime-lending rate was 4.00 percent for the first
quarter of 2009, compared to an average of 4.20 percent for the fourth quarter of 2008. Our prime-lending
rate at March 31, 2009 and December 31, 2008 was 4.00 percent.
• A decrease in interest expense of $1.3 million from our long-term debt, primarily driven by a decrease in
interest expense associated with interest rate swap agreements for our 5.70% senior and 6.05%
subordinated notes, due to lower London Interbank Offered Rates (“LIBOR”).
• A decrease in interest expense of $0.8 million from our short-term borrowings due to a decrease in
average balances of $185.5 million.
Our net interest margin, on a fully taxable equivalent basis, was 3.97 percent for the first quarter of 2009,
compared to 5.39 percent for the fourth quarter of 2008 and 6.27 percent for the first quarter of 2008. The
decrease from the fourth quarter of 2008 to the first quarter of 2009 was primarily due to an increase in cash as a
result of the growth in interest-bearing deposits, which were primarily invested in overnight funds with the Federal
Reserve, as well as decreases in interest income from our loan portfolio due to the full quarter effect of reductions
in our prime-lending rate, and decreases in average loan balances. These reductions in our net interest margin
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were partially offset by a decrease in interest expense from borrowings due to lower LIBOR rates as well as lower
average balances outstanding.
On an average basis, for the first quarter of 2009, 72.8 percent, or $3.7 billion, of our outstanding gross loans
were variable-rate loans that adjust at prescribed measurement dates upon a change in our prime-lending rate or
other variable indices. This compares to 74.2 percent, or $4.0 billion, for the fourth quarter of 2008 and
71.7 percent, or $3.1 billion, for the first quarter of 2008.
Investment Securities
Our investment securities portfolio consists of both a fixed income investment portfolio, which primarily represents
interest-earning securities, and a non-marketable securities portfolio, which primarily represents investments
managed as part of our funds management business. Total investment securities were $2.0 billion at
March 31, 2009, compared to $1.8 billion at December 31, 2008 and $1.6 billion at March 31, 2008. The increase
from December 31, 2008 to March 31, 2009 was primarily due to purchases of U.S. agency securities as part of
our overall investment strategy.
Average interest-earning investment securities were $1.5 billion for the first quarter of 2009, compared to
$1.4 billion for the fourth quarter of 2008 and $1.3 billion for the first quarter of 2008.
Non-marketable securities were $454.5 million ($178.4 million net of noncontrolling interests) as of March
31, 2009, compared to $467.2 million ($169.1 million net of noncontrolling interests) as of December 31, 2008.
The decrease from the fourth quarter of 2008 to the first quarter of 2009 was primarily attributable to unrealized
valuation losses of venture capital/private equity investments, partially offset by new investments in the first
quarter of 2009. Reconciliations of our non-GAAP non-marketable securities, net of noncontrolling interests, are
provided below under the section “Use of Non-GAAP Financial Measures.”
Loans
Average loans, net of unearned income, were $5.1 billion for the first quarter of 2009, compared to $5.2 billion for
the fourth quarter of 2008 and $4.1 billion for the first quarter of 2008. The decrease in average loan balances
from the fourth quarter of 2008 to the first quarter of 2009 came primarily from decreases in loans to venture
capital/private equity funds for capital calls due to continuing effects of the downturn in the economic environment
causing pressures on mergers and acquisitions (“M&A”) activity and lower levels of venture capital investments.
Period-end loans, net of unearned income, were $5.0 billion at March 31, 2009, compared to $5.5 billion at
December 31, 2008 and $4.3 billion at March 31, 2008.
Our nonaccrual loans totaled $97.6 million at March 31, 2009, compared to $84.9 million at December 31, 2008
and $7.6 million at March 31, 2008. The allowance for loan losses related to nonaccrual loans was $40.9 million,
$25.9 million and $1.7 million at March 31, 2009, December 31, 2008 and March 31, 2008, respectively. The
increase in nonaccrual loans and related allowance for loan losses from the fourth quarter of 2008 to the first
quarter of 2009 primarily came from a single loan within our hardware industry portfolio, which required a reserve
of $9.2 million.
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5.
The following table provides a summary of our concentration of loans individually greater than $20 million by
industry sector at March 31, 2009, December 31, 2008 and March 31, 2008.
Loans individually greater than $20 million at
March 31, December 31, March 31,
2009 2008 2008
(Dollars in thousands, except ratios and client data)
Technology $ 493,835 $ 567,867 $ 285,143
Private Equity 254,348 352,065 375,351
Life Sciences 28,750 54,201 56,589
Private Client Services 102,491 105,176 64,193
Premium Wineries - 20,310 -
All other sectors 48,687 50,500 119,372
Total $ 928,111 $ 1,150,119 $ 900,648
Loans individually greater than $20 million as a
percentage of total gross loans 18.40 % 20.72 % 20.57 %
Total clients with loans individually greater than $20 million 29 36 25
Loans individually greater than $20 million on
nonaccrual status $ 64,085 $ 66,715 $ -
Deposits
Average deposits were $7.9 billion for the first quarter of 2009, compared to $5.7 billion for the fourth quarter of
2008 and $4.4 billion for the first quarter of 2008. The increase in average deposit balances from the fourth
quarter of 2008 to the first quarter of 2009 came primarily from our noninterest-bearing demand deposits, which
grew by $1.4 billion to $4.6 billion, and our sweep deposits, which grew by $989.2 million to $1.6 billion.
Period-end deposits were $8.5 billion at March 31, 2009, compared to $7.5 billion at December 31, 2008 and $4.8
billion at March 31, 2008.
Growth in both average and period-end deposit balances in the first quarter of 2009 was primarily due to the
following factors: (i) our decision in late 2008 to utilize our own on-balance sheet sweep product, and to
discontinue offering a third-party, off-balance sheet product; and (ii) the desire among some clients to benefit from
the security provided by Federal Deposit Insurance Corporation (“FDIC”) insurance in noninterest-bearing
accounts.
Long-Term Debt
Effective January 1, 2009, we adopted the Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”)
Accounting Principles Board Opinion No. 14-1, Accounting for Convertible Debt Instruments That May Be Settled
in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”), which required a change in the
accounting treatment for our convertible debt instruments. The FSP requires that the proceeds from the issuance
of convertible debt instruments be allocated between a liability and an equity component in a manner that reflects
the entity’s non-convertible debt borrowing rate when interest expense is recognized in subsequent periods. The
resulting debt discount is amortized over the period the convertible debt is expected to be outstanding as
additional non-cash interest expense. Historical financial statements for 2007 and 2008 are required to be
adjusted retrospectively to conform to the FSP’s new accounting treatment for both our zero-coupon convertible
subordinated notes, which matured on June 15, 2008 and our 3.875% convertible senior notes due April 15,
2011.
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6.
As a result of adopting the requirements of FSP APB 14-1, our net loss applicable to common stockholders for the
first quarter of 2009 increased by $0.3 million. Total SVBFG stockholders’ equity, based on cumulative
adjustments beginning January 1, 2007, through March 31, 2009, increased by $4.9 million. The following table
highlights certain revised items related to the adoption of FSP APB 14-1 in our overall consolidated statements of
income and balance sheets for the quarters ended March 31, 2009, December 31, 2008, and March 31, 2008:
Three months ended
December 31, 2008 March 31, 2008
March 31, 2009
As adjusted As reported in As adjusted As reported in
(Dollars in thousands) As reported (1/1/2009) prior filings (1/1/2009) prior filings
INCOME STATEMENT
Interest expense - borrowings $ 8,181 $ 10,219 $ 9,694 $ 12,536 $ 11,233
Income tax (benefit) expense (1,702) 2,111 2,319 18,283 18,801
Net (loss) income attributable to SVBFG (7,010) 2,105 2,422 27,118 27,903
Net (loss) income available to common stockholders (10,546) 1,398 1,715 27,118 27,903
(Loss) earnings per common share — diluted (0.32) 0.04 0.05 0.78 0.81
FULLY TAXABLE EQUIVALENT
Net interest income (fully taxable equivalent basis) $ 92,083 $ 97,024 $ 97,549 $ 91,283 $ 92,586
Net interest margin 3.97 % 5.39 % 5.42 % 6.27 % 6.36 %
BALANCE SHEET
Total assets $ 10,958,768 $ 10,020,808 $ 10,020,892 $ 6,897,285 $ 6,897,303
Long-term debt 964,175 995,423 1,000,640 892,516 893,189
Additional paid-in capital 71,760 66,201 45,872 13,975 -
Retained earnings 701,709 712,254 727,450 664,085 678,078
Noninterest (Loss) Income
Noninterest loss was $3.6 million for the first quarter of 2009, compared to noninterest income of $28.9 million for
the fourth quarter of 2008 and noninterest income of $41.6 million for the first quarter of 2008.
Non-GAAP noninterest income, net of noncontrolling interests, was $27.0 million for the first quarter of 2009,
compared to $37.5 million for the fourth quarter of 2008 and $43.3 million for the first quarter of 2008.
Reconciliations of our non-GAAP noninterest income and non-GAAP net losses on investment securities, both of
which exclude amounts attributable to noncontrolling interests, are provided below under the section “Use of Non-
GAAP Financial Measures.”
The decrease in noninterest income (GAAP basis) from the fourth quarter of 2008 to the first quarter of 2009 was
primarily driven by the following factors:
• Net losses on investment securities of $35.0 million for the first quarter of 2009, compared to net losses of
$9.8 million for the fourth quarter of 2008 and net losses of $6.1 million for the first quarter of 2008. The
increase in net losses of $25.2 million from the fourth quarter of 2008 to the first quarter of 2009 was
primarily due to the continuing effects of the downturn in the overall economy on valuations of our venture
capital/private equity investments. The following table provides a summary of net losses on investment
securities for the three months ended March 31, 2009 and December 31, 2008:
Three months ended
December 31, 2008
March 31, 2009
Managed Co- Managed
Investment Funds Of Sponsored Debt
Funds Funds Funds Total
(Dollars in thousands) Other Total
Unrealized (losses) gains $ (4,697) $ (31,079) $ 984 $ - $ (34,792) $ (7,207)
Realized (losses) gains (523) 883 240 (853) (253) (2,621)
$ (5,220) $ (30,196) $ 1,224 $ (853) $ (35,045) $ (9,828)
Total (losses) gains on investment securities, net
Less: (losses) income attributable to noncontrolling
interests, including carried interest (4,777) (26,105) 444 - (30,438) (8,702)
Non-GAAP net (losses) gains on investment
securities, net of noncontrolling interests $ (443) $ (4,091) $ 780 $ (853) $ (4,607) $ (1,126)
As of March 31, 2009, we held investments, either directly or through seven of our managed investment
funds, in 440 venture capital/private equity funds, 73 companies and four sponsored debt funds.
• A decrease in client investment fee income of $3.2 million, primarily from our decision in the latter part of
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the fourth quarter of 2008 to discontinue offering a third party off-balance sheet sweep product which
reduced average client fund balances by $2.0 billion, and a result of lower margins earned on certain
products owing to historically low rates in the short-term fixed income markets.
• A decrease in net gains on derivative instruments of $3.2 million. The following table provides a summary
of our net gains on derivative instruments:
Three months ended
March 31, December 31, March 31,
2009 2008 2008
(Dollars in thousands)
Gains (losses) on foreign exchange forward contracts, net:
Gains on client foreign exchange forward contracts, net $ 496 $ 2,466 $ 728
Gains (losses) on internal foreign exchange forward contracts, net (1) 1,943 3,200 (3,091)
Total gains (losses) on foreign exchange forward contracts, net 2,439 5,666 (2,363)
Change in fair value of interest rate swap (170) (2,232) (493)
Net (losses) gains on equity warrant assets (455) 1,592 5,455
$ 1,814 $ 5,026 $ 2,599
Total gains on derivative instruments, net
(1) Represents the change in fair value of foreign exchange forward contracts used to economically reduce our
foreign exchange exposure related to certain foreign currency denominated loans. Revaluations of foreign
currency denominated loans are recorded on the line item “Other” as part of noninterest (loss) income, a
component of consolidated net (loss) income.
The decrease in net gains on derivative instruments from the fourth quarter of 2008 to the first quarter of
2009 was primarily driven by the following factors:
Lower gains of $2.0 million on client foreign exchange forward contracts primarily due to lower
o
volatility in the currency markets. In addition, we recognized $1.9 million from internal foreign
exchange forward contracts hedging our foreign currency denominated loans, which partially
offset net losses of $2.7 million from revaluation of our foreign currency denominated loans that
are included in other noninterest income.
Net losses on equity warrant assets of $0.5 million in the first quarter of 2009, compared to net
o
gains of $1.6 million in the fourth quarter of 2008, primarily due to higher warrant terminations and
lower valuations of certain investments in our warrant portfolio.
Lower net losses of $2.1 million from changes in the fair value of the interest rate swap
o
associated with our junior subordinated debentures. In December 2008, our counterparty called
this swap for settlement in January 2009. As a result, the swap is no longer designated as a
hedging instrument.
• A decrease in foreign exchange fees of $1.2 million, primarily due to a decrease in client trading activity.
Noninterest Expense
Noninterest expense was $87.1 million for the first quarter of 2009, compared to $61.8 million for the fourth
quarter of 2008 and $83.4 million for the first quarter of 2008.
Non-GAAP noninterest expense, net of noncontrolling interests, was $79.7 million for the first quarter of 2009,
compared to $58.8 million for the fourth quarter of 2008 and $80.7 million for the first quarter of 2008.
Reconciliations of our non-GAAP noninterest expense, net of noncontrolling interests, are provided below under
the section “Use of Non-GAAP Financial Measures.”
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The following table provides a summary of certain noninterest expense (GAAP basis) items:
Three months ended
March 31, December 31, March 31,
2009 2008 2008
(Dollars in thousands)
Compensation and benefits:
Salaries and wages $ 29,291 $ 27,196 $ 25,927
Incentive Compensation Plan 5,039 (8,782) 11,253
Employee Stock Ownership Plan - (4,370) 1,771
Other employee benefits 13,950 9,833 14,830
Total compensation and benefits 48,280 23,877 53,781
Impairment of goodwill 4,092 - -
FDIC assessments 2,675 1,644 436
(Reduction of) provision for unfunded credit commitments (2,284) 1,607 (165)
Other (1) 34,377 34,702 29,385
Total noninterest expense $ 87,140 $ 61,830 $ 83,437
(1) Other noninterest expense includes professional services, premises and equipment, net occupancy, business
development and travel, correspondent bank fees, telephone, data processing services, and other noninterest expenses.
For further details of noninterest expense items, please refer to “Interim Consolidated Statements of Income”.
The increase in noninterest expense (GAAP basis) from the fourth quarter of 2008 to the first quarter of 2009 was
primarily attributable to the following:
• An increase of $24.4 million in compensation and benefits expense, primarily as a result of the following:
An increase of $18.2 million in incentive compensation related expenses due to lower incentive
o
compensation related expenses in the fourth quarter of 2008, as a result of 2008 annual financial
results being below our expectations.
An increase of $2.1 million in salaries and wages primarily resulting from an increase in the
o
number of average full-time equivalent (“FTE”) employees. The average number of FTEs
increased by 18 to 1,258 FTEs for the first quarter of 2009, compared to an average of 1,240
FTEs for the fourth quarter of 2008.
• A non-tax deductible goodwill impairment charge of $4.1 million resulting from changes in our outlook for
eProsper’s future financial performance due in part to the current economic environment.
• An increase of $1.0 million in FDIC assessments primarily attributable to a $2.3 billion increase in
average deposit balances in the first quarter of 2009, as well as an increase in FDIC fee rates.
• A reduction of provision for unfunded credit commitments of $2.3 million for the first quarter of 2009,
compared to a provision of $1.6 million for the fourth quarter of 2008. The reduction of provision for
unfunded credit commitments of $2.3 million for the first quarter of 2009 was primarily reflective of a
decrease in the balance of our total unfunded credit commitments. Total unfunded credit commitments
were $5.0 billion at March 31, 2009, compared to $5.6 billion at December 31, 2008.
Income Tax (Benefit) Expense
Effective January 1, 2009, we adopted SFAS No. 160, which requires us to clearly identify and distinguish
between the interests of the Company and the interest of the noncontrolling owners by presenting noncontrolling
interests after net (loss) income in our interim consolidated statements of income. As a result, our effective tax
rate is calculated by dividing income tax (benefit) expense by the sum of (loss) income before income tax (benefit)
expense and the net (loss) income attributable to noncontrolling interests.
Our effective tax rate was 19.5 percent for the first quarter of 2009, compared to 50.1 percent for the fourth
quarter of 2008 and 40.3 percent for the first quarter of 2008. The decrease in the tax rate from the fourth quarter
of 2008 to the first quarter of 2009 was primarily attributable to a 37.8 percent rate decrease due to the higher tax
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impact of tax advantaged investments on our overall pre-tax loss. This decrease was partially offset by a 16.4
percent increase in our tax rate due to the tax impact of the $4.1 million non-tax deductible goodwill impairment
associated with eProsper.
Credit Quality
The following table provides a summary of our allowance for loan losses:
Three months ended
March 31, December 31, March 31,
(Dollars in thousands) 2009 2008 2008
Allowance for loan losses, beginning balance $ 107,396 $ 60,290 $ 47,293
Provision for loan losses 43,466 70,957 7,723
Gross loan charge-offs (42,013) (25,509) (6,208)
Loan recoveries 1,161 1,658 828
Allowance for loan losses, ending balance $ 110,010 $ 107,396 $ 49,636
Provision as a percentage of total gross loans (annualized) 3.49 % 5.08 % 0.71 %
Gross loan charge-offs as a percentage of average total gross loans (annualized) 3.30 1.93 0.60
Net loan charge-offs as a percentage of average total gross loans (annualized) 3.21 1.80 0.52
Allowance for loan losses as a percentage of total gross loans 2.18 1.93 1.13
Total gross loans at period-end $ 5,045,208 $ 5,551,636 $ 4,377,498
Average total gross loans 5,159,412 5,266,380 4,141,414
Our provision for loan losses of $43.5 million for the first quarter of 2009 was primarily attributable to the following:
• Gross loan charge-offs of $23.1 million and reserves of $9.2 million related to two loans within our
hardware industry portfolio.
• Gross loan charge-offs of $18.9 million, primarily from our early-stage client portfolio.
• A reduction of $7.0 million in general reserves due to the decline in period-end loan balances.
• A reversal of $4.9 million in specific reserves due to the repayment by affiliates of HRJ Capital, LLC
(“HRJ”) of certain outstanding balances on capital call lines of credit during the first quarter of 2009.
• Loan recoveries of $1.2 million, primarily from our early-stage and corporate technology client portfolios.
• Our net loan charge-offs as a percentage of average total gross loans (annualized) was 3.21 percent for
the first quarter of 2009, compared to our allowance for loan losses as a percentage of total gross loans
of 2.18 percent for the first quarter of 2009. We expect net charge-offs for the full year 2009 to be lower
than the annualized trend indicated by the first quarter 2009 results.
An independent asset management firm recently announced that it had entered into a term sheet with HRJ to
assume the management of HRJ’s funds of funds. The final transaction is subject to the execution of definitive
agreements between the parties and other closing conditions. If the transaction closes based on the proposed
terms, we do not expect it to have a material impact on our net income and provision for loan losses.
Noncontrolling Interests
Net loss attributable to noncontrolling interests (formerly referred to as minority interests) was $34.0 million for the
first quarter of 2009, compared to a net loss of $11.7 million for the fourth quarter of 2008 and a net loss of $4.2
million for the first quarter of 2008. Net loss attributable to noncontrolling interests of $34.0 million for the first
quarter of 2009 was primarily attributable to the following:
• Losses on investment securities (including carried interest) attributable to noncontrolling interests of $30.4
million, stemming mainly from losses of $26.1 million from our managed funds of funds and $4.8 million
from our managed co-investment funds.
• Noninterest expense of $3.4 million, principally related to management fees paid by the noncontrolling
interests to the general partner entities managed by SVB Capital.
Capital
Included in the net loss applicable to common stockholders for the first quarter of 2009 is $3.5 million related to
dividends and discount amortization in connection with our preferred stock issued under the Capital Purchase
Program (“CPP”) on December 12, 2008. This compares to $0.7 million for the fourth quarter of 2008, which was
reflective of the preferred stock being outstanding for only part of the fourth quarter of 2008.
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Outlook for the Year Ending December 31, 2009
Our outlook for the year ending December 31, 2009 is provided below on a GAAP basis, unless otherwise noted.
We have provided our current outlook for the expected full year results of our significant forecasted activities. In
general, we do not provide our outlook for selected items where the timing or financial impact are particularly
uncertain, or for certain potential unusual or one-time items; however in light of the current uncertain economic
environment, we have provided directional guidance on two such elements, specifically net gains (losses) from
equity warrant assets and net gains (losses) from investments in venture capital/private equity related activities.
The outlook observations presented below are, by their nature, forward-looking statements and are subject to
substantial risks and uncertainties which are discussed below under the caption “Forward-Looking Statements”.
For the year ending December 31, 2009, compared to our 2008 results, we currently expect the following outlook:
Current outlook compared to 2008 results as Change in outlook compared to outlook reported as of
of April 23, 2009 January 22, 2009
Increase at a percentage rate in the high single Outlook decreased from mid-teens, due to overall market
Average loan balances
digits conditions
Increase at a percentage rate in the sixties; Outlook increased from high thirties, due to higher-than-expected
Average deposit balances majority of growth from interest-bearing retention of new deposits on balance sheet in the fourth quarter of
deposits 2008 and the first quarter of 2009
Outlook decreased from 4.7% - 5.0% range, due to higher-than-
Net interest margin Betrween 3.7% to 4.0%
expected levels of cash invested in a lower rate environment
Approximately 1.9% of total gross loans. Outlook increased from 1.4%, due to increased levels of total
Allowance for loan losses as a
Range is exclusive of existing specific reserves charge-offs in the first quarter of 2009 as well as higher levels of
percentage of gross loans
for impaired loans specific reserves for loans impaired in the first quarter of 2009
Outlook increased from 1.3% due to increased levels of total
Between 1.75% to 1.80% of total gross loans.
charge-offs in the first quarter of 2009
Range is inclusive of approximately $40.9
million in net charge-offs in the first quarter of
2009 but exclusive of any potential net charge
offs related to loans impaired as of March 31,
Net loan charge-offs 2009. For the second through fourth quarter of
2009, we expect quarterly net charge-offs
(annualized) of approximately 1.4% of total
gross loans, excluding any potential net charge-
offs related to loans impaired as of March 31,
2009
Ratio of non-performing loans and Increase during 2009 due to current and
No change from previous outlook
assets expected economic conditions
Fees for deposit services, letters
Increase at a percentage rate in the low single Outlook decreased from mid single digits, due to overall market
of credit and foreign exchange, in
digits conditions
aggregate
Decline significantly to approximately one-half
Client investment fees No change from previous outlook
of 2008 levels
Net gains (losses) from equity Outlook worsened from a modest decline, due to overall market
No net gains expected
warrant assets conditions
Outlook worsened from modest increase in losses, due to the
Net losses on investment
continuing effects of the downturn in the overall economy, causing
securities, net of noncontrolling Increase to approximately double of 2008 levels
pressures on valuations of venture capital/private equity
interests*
investments
Noninterest expense* (excluding
Outlook decreased from high twenties, due to lower compensation
expenses related to goodwill
Increase at a percentage rate in the high teens and benefits, partially offset by continued investment in our core
impairment and noncontrolling
business and significantly higher FDIC assessment fees
interests)
* non-GAAP
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements are statements that are not historical facts, such as forecasts of our
future financial results and condition, expectations for our operations and business, and our underlying
assumptions of such forecasts and expectations. In this release, including in the section “Outlook for the Year
Ending December 31, 2009” above and in our discussion of the term sheet entered into between HRJ and an
independent asset management firm, we make forward-looking statements discussing management’s
expectations about economic conditions, opportunities in the market, our financial and credit performance and
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financial results (and the components of such results) and expectations about the impact of transactions for the
year 2009.
Although management believes that the expectations reflected in our forward-looking statements are reasonable
and has based these expectations on our beliefs and assumptions, such expectations are not guarantees and
may prove to be incorrect. Actual results could differ significantly. Factors that may cause the outlook for the year
2009 and other forward-looking statements herein to change include, among others, the following: (i) accounting
changes, as required by U.S. generally accepted accounting principles, (ii) continued deterioration or other
changes in the state of the economy or the markets in which we conduct business or are served by us, (iii)
changes in credit quality of our loan portfolio, (iv) changes in interest rates or market levels or factors affecting
them, (v) changes in the performance or equity valuations of funds or companies in which we have invested or
hold derivative instruments or equity warrant assets, (vi) variations from our expectations as to factors impacting
our cost structure, (vii) errors in our assessment of the creditworthiness or liquidity of our clients or unanticipated
effects of credit concentration risks which create or exacerbate deterioration of such creditworthiness or liquidity
and (viii) challenges in obtaining approvals or satisfying other conditions to completing the proposed transaction
between HRJ and an independent asset management firm on the terms proposed. For additional information
about these factors, please refer to our public reports filed with the U.S. Securities and Exchange Commission,
including our most recently-filed quarterly or annual report. The forward-looking statements included in this
release are made only as of the date of this release. We do not intend, and undertake no obligation, to update
these forward-looking statements.
Earnings Conference Call
On April 23, 2009, we will host a conference call at 3:00 p.m. (Pacific Time) to discuss the financial results for the
first quarter ended March 31, 2009. The conference call can be accessed by dialing (877) 663-9523 or (404) 665-
9482, and referencing the conference ID “95053970”. A live webcast of the audio portion of the call can be
accessed on the Investor Relations section of our website at www.svb.com. A replay of the conference call will be
available beginning at approximately 6:00 p.m. (Pacific Time) on Thursday, April 23, 2009, through midnight on
Thursday, May 7, 2009, by dialing (800) 642-1687 or (706) 645-9291 and referencing conference ID number
“95053970.” A replay of the audio webcast will also be available on www.svb.com for 12 months beginning
Thursday, April 23, 2009.
About SVB Financial Group
For over 25 years, SVB Financial Group and its subsidiaries, including Silicon Valley Bank, have been dedicated
to helping entrepreneurs succeed. SVB Financial Group is a financial holding company that serves companies in
the technology, life science, venture capital/private equity and premium wine industries. Offering diversified
financial services through Silicon Valley Bank, SVB Analytics, SVB Capital, SVB Global and SVB Private Client
Services, SVB Financial Group provides clients with commercial, investment, international and private banking
services. The Company also offers funds management, broker-dealer services and asset management, as well as
the added value of its knowledge and networks worldwide. Headquartered in Santa Clara, California, SVB
Financial Group operates through 27 offices in the U.S. and international operations in China, India, Israel and the
United Kingdom. More information on the Company can be found at www.svb.com. (SIVB-F)
Banking services are provided by Silicon Valley Bank, the California bank subsidiary and commercial banking
operation of SVB Financial Group, and a member of the FDIC and the Federal Reserve. SVB Private Client
Services is a division of Silicon Valley Bank. SVB Financial Group is also a member of the Federal Reserve.
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